THE COMPULSORY LOAN

Otago Daily Times, Issue 24423, 8 October 1940, Page 11

THE COMPULSORY LOAN

TO THE EDITOR

Sir,—l submit to your correction that you do not allege hardship through loss of interest as your objection to the war loan. It is the compulsory element that is objected to. Nevertheless, you again say that if the loan had been issued as a voluntary one “ bearing from the commencement of its term a low rate of interest, it would almost certainly have succeeded in providing the Government’s immediate requirements.” This seems to me to imply an admission that an interest-free loan on a voluntary basis would not have succeededynot bec..use itiijyblves hardship, but because a good many “investors ” disapprove of We interestfree provisions. I have no doubt that thousands would have subscribed voluntarily, but for those who would have held back the hint of compulsion is surely justified in order that the burden should not fall entirely on the willing horses. Speaking of burden reminds me of the complaints in your editorials, and from the Opposition members in the House, that the burden of the loan falls on “a limited number who are amongst the most severely taxed in the community.” I admit that the wealthy are heavily taxed in the abstract, but how do they fare in comparison with the poor? In earlier editorials, when you were attacking the financial policy of the Government, you have asserted time and again that sales tax and inflation and high cost of living, etc., have imposed a severe (although indirect and no doubt unintentional) tax on the wage earning and poorer classes. So presumably they have, but little surplus out of which they could subscribe to war loans. On the other hand, how do the wealthy individuals and companies stand, even afier they have paid their high taxation? Perhap a little parable will answer this. ; There once was an orphanage where the children were allowed to help themselves to meals. What a scramble! Most of them got a fair meal, but some got barely one plateful, while a few got about 20 plates. (The proportion is the' same as between incomes of £250 and £SOOO a year.) The matron then came along to adjust the helpings, and took back a few spoonfuls from some, but,took five or six plates from the greedy ones, who complained bitterly that they were being taxed too heavily. Even then they had 14 plates left, which was much more than they could eat, so they “ lent ” the matron eight plates more to use for the sick children and the orphanage cadets. As a reward for the loan they were given lollies, which the other children didn't get. Once when times were hard, the matron found 'she couldn’t afford the lollies, and they had to lend their spare platefuls free for a little while. They. protested that.it wa s not right that they alone (a small class) should be “ compelled ”■ to make this sacrifice, but one little girl who had only one plateful pointed out that she was giving back three spoonfuls, and that the grumblers still had six plates left, and any more would give them indigestion. —I am. etc., Lexecon. Dunedin, October 5:

TO THE ’ EDITOR _Sir.—The Minister of Finance, in his effort to raise money for war expenditure, appears to have cast all discretion to the winds. The compulsory loan or levy is nothing more , than a raid on the capital of individuals and companies. The great majority of citizens will not be affected directly,, and so may be inclined to treat the matter with indifference—one of the greatest mistakes they could make. Some of the higher income group may be able to find the money without difficulty; others will be forced to borrow from the bank —a wonderful proposition indeed, borrowing money at per cent, or more in order to lend it to the Government free of .interest for three years' and at' 2'i per cent, thereafter. A better scheme for the gradual destruction of capitalism could hardly be devised. Where companies are concerned it may be taken for granted that the levy will be written in to,their overhead costs, with a consequent increase in prices and a further rise in the cost of living. This is where the wage-earners will catch it. So als<will the small farmers and all others in the lower income group. That a heavy war expenditure is necessary cannot be disputed! and the question arises how Mr Nash could have raised the money otherwise than by a compulsory loan. Taxation appears to have reached its limit for the time being, but there is probably a large amount of free capital which could be obtained as a voluntary loon at a nominal rate of interest, say 2 oer cent., on an appeal to patriotic sentiment. If a sufficient amount was not forthcoming under such conditions. I would say unhesitatingly that the time had come for the use of Reserve Bank credit. Should inflation occur thereby it would be oart of the price we have to pay for the war. It would not in any case. I think, have a worse result than the increased costs imposed by the capital levy on companies. Inflation means an increase in the price of goods due to an over-supply of monev or purchasing power in proportion to the goods available. Aciually it indicates a shortage of goods. The remedy for inflation is either a reduction in purchasing power or else an increase in the volume of goods. There is no valid reason why a combination of both remedies should not be put into practice. The present high rate of taxation may be relied on to keep ea-nings. both company and in-

dividual. down to a modest level. The only wav to increase the supply of e grds is by working longer hours. The lime is ripe for all secondary and servicing industries to work at least a 50-hour week. Distasteful as it may seem to trade unionists and Socialist idealists, there is no alternative if we are to do our part in the war effort and retain our standard of living at the same time. —I am. etc., Countryman.